The New Learning Curve: Using the Data

The paradox of data is, as observed by panellists at Forex Network Chicago, while the data itself is becoming cheaper and more easily accessible than ever before, the resources being allocated to analysing it are increasing, bringing with it increased costs.

“The core fundamental cost of collecting data and storing and processing it is cheaper than ever,” observed John Ashworth, CEO of Caplin. “The premium is going to be on the labour force that will be doing the work on the data.”

Stuart Farr, president of Deltix, agreed, “The idea that accessing data is cost prohibitive for some firms is very wrong – it is very affordable and the technology to support these operations is also going down in price. The cost is the people cost – it is having access to people who understand the value of the data and can extract it. People with computer and data science smarts that are able to do this work is where the cost is going up.”

Mike Suppa, director, market development, North America, at Thomson Reuters, acknowledged that the cost of data is “not going up”, however he also observed, “There are just a lot more sources, so the people that want to play in this space have an overall larger data spend in order to compete. They need to take in more data today than they ever did.

“Not everyone will have the pockets to compete in this environment,” Suppa added. “But those that do have the budget will thrive.”

Roel Oomen, managing director, e-FX spot trading at Deutsche Bank, argued that ultimately taking data from multiple sources came down to a commercial decision. “It is evident that electronic liquidity provision has come to rely on a growing set of data sources, and you’d therefore expect investment in this area to increase, but it doesn’t necessarily mean individual data sources are becoming more expensive or inaccessible to certain participants,” he said.

“The increased spent across the data infrastructure now accounts for a substantial part of overall costs, and it focusses the business decisions to selectively invest in data sources that are adding value to the offering,” he added. “We’ll regularly pass on new data offerings, but equally, if we believe they offer substantial incremental value we’ll invest – this is no different to any other products, it is a commercial decision.”

From his perspective Ron Klipstein, global head of FX e-commerce at Northern Trust, argued that different data needs dictated each firm’s spend. “It depends upon what you are looking at,” he explained. “If you are looking at a consolidated data feed, sure it’s cheaper. If you’re looking at publicly available sources they have also become cheaper. We are cross-connected in data centres around the world and have over 50 different end points – this connectivity has definitely not gotten cheaper, it’s more expensive.

“We use the cloud a little, but mostly we use our own servers and maintaining them is also expensive, as is maintaining all the cross-connects we use for trading – that has gotten exponentially more expensive,” he added.

The good news for those seeking to enhance their data handling capabilities is that technology continues to improve. “The technology is being generated and enhanced at a terrific rate,” said Ashworth. “The challenge is that it has out-stripped the ability of the universities to produce people with the skill sets to normalise, cleanse and analyse the data. At the moment there are not enough skilled graduates to fill the gaps in the industry, however that will change in the coming years particularly given the rate of graduation from tertiary education in China and elsewhere in the Far East.”

The idea of data being an area divided between the “haves” and “have nots” generated no little debate on the stage, for while it was accepted that larger players with deeper pockets would inevitably have a resource advantage, smaller players could compete because of the valuable data within their own institution. “There is a huge amount of valuable, static data, in lower tier banks,” observed Ashworth. “So while they are customers of the top tier firms they remain in an incredibly powerful position thanks to the data they have on their customers – and not just in FX. The big players will inevitably thrive in a data-driven environment, however for the smaller firms, if they can tie up the various databases across the asset classes, they can undoubtedly compete.”